You Can't Opt-Out of the Federal Rules: Why Rule 23 Certification Standards Should Apply to Opt-In Collective Actions under the FLSA

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1 You Can't Opt-Out of the Federal Rules: Why Rule 23 Certification Standards Should Apply to Opt-In Collective Actions under the FLSA By Allan G. King, Lisa A. Schreter, and Carole F. Wilder SUMMARY Nearly 2,000 collective actions under the Fair Labor Standards Act have been filed in the federal courts during the past year, continuing a trend of several years duration. A pivotal juncture in these cases arises when plaintiffs move for conditional certification, or more precisely court-assisted notice to potential opt-in plaintiffs. The Supreme Court has not endorsed any standard for deciding these motions nor does the statute or its regulations provide any guidance. As a result, courts have resorted to an ad hoc procedure, which in most instances results in subjecting this motion to a very relaxed standard of scrutiny. This article critically assesses that practice and examines the argument for applying the principles for class certification set forth in Rule 23 to these motions. It draws on the authority of the Rules Enabling Act, specifically the abrogation clause, and explains the narrow circumstances under which courts may modify the Federal Rules. In addition, it discusses the Rules of the Court of Federal Claims, which provide an example of how class action principles can accommodate the opt-in requirements of the FLSA. This example is pertinent because the Court of Federal Claims, in contrast to the Federal Rules, permits only opt-in class actions. Lastly, the article points out that by failing to apply Rule 23 principles in FLSA cases when they are joined with state law claims that are subject to Rule 23 (which is commonplace), courts can reach inconsistent conclusions certifying essentially the same case under one set of principles but not the other. 1

2 You Can't Opt-Out of the Federal Rules: Why Rule 23 Certification Standards Should Apply to Opt-In Collective Actions under the FLSA By Allan G. King, Lisa A. Schreter, and Carole F. Wilder 1 [T]he district courts of this Circuit appear to have coalesced around a two-step method... not required by the terms of FLSA or the Supreme Court s cases... 2 I. Introduction. The procedures federal courts follow in determining whether to conditionally certify 3 a collective action under 216(b) of the Fair Labor Standards Act (FLSA) 4 are sui generis. Indeed, neither the statute or its regulations define the term collective action. The pertinent section of the statute merely provides: An action... may be maintained... by any one or more employees for and in behalf of himself or themselves and other employees similarly situated. No employee shall be a party plaintiff to any such action unless he gives his 1 The authors are attorneys with the firm of Littler Mendelson, P.C. 2 Myers v. Hertz Corp., 624 F.3d 537, (2d Cir. 2010). 3 Myers may finally have put an end to the use of term conditional certification in connection with this statute, at least in the Second Circuit. It notes that certification of an FLSA collective action is an empty gesture, which is neither necessary nor sufficient for the case to proceed as a collective action: Indeed, while courts speak of certifying a FLSA collective action, it is important to stress that the certification we refer to here is only the district court s exercise of the discretionary power, upheld in Hoffmann-La Roche, to facilitate the sending of notice to potential class members. Section 216(b) does not by its terms require any such device, and nothing in the text of the statute prevents plaintiffs from opting in to the action by filing consents with the district court, even when the notice described in Hoffmann-La Roche has not been sent, so long as such plaintiffs are similarly situated to the named individual plaintiff who brought the action. See Morgan v. Family Dollar Stores, Inc., 551 F.3d 1233, 1259 (11th Cir. 2008) (noting that certification of a collective action is a device to facilitate notice to potential class members and does not actually create a class of plaintiffs for a FLSA collective action). Thus certification is neither necessary nor sufficient for the existence of a representative action under FLSA, but may be a useful case management tool for district courts to employ in appropriate cases. Id. at 555, n. 10 (citing Hoffmann-La Roche Inc. v. Sperling, 493 U.S. 165, 169, 174 (1989)). 4 FLSA 16(b) is codified at 29 U.S.C. 216(b) (hereinafter referred to as FLSA 216(b) or simply 216(b), although quotes from some courts refer to 16(b) ). 2

3 consent in writing to become such a party and such consent is filed in the court in which such action is brought. 5 Based upon the designation of employees who consent to join the action as party plaintiffs, a reasonable perspective is that these cases are mass actions, in which the claims of a number of plaintiffs are joined together in one proceeding. However, each individual plaintiff still must present evidence with respect to his or her claim in order to prevail. 6 Most courts, however, do not accept this view and instead consider collective actions under 216(b) to be representative actions, in which evidence regarding a subgroup of plaintiffs is extrapolated to the absent parties. 7 If we are to accept this framework, collective actions are, in reality, just a different type of class action. In fact, under this interpretation, the only truly significant difference is that, in a Rule 23 class action, plaintiffs must affirmatively decline to participate in the suit (i.e., opt out ) to avoid being bound by its result, whereas under FLSA 216(b) similarly situated 5 29 U.S.C. 216(b). 6 See A.G. King & C. C. Ozumba, Strange Fiction: The Class Certification Decision in FLSA Collective Actions, 24 LAB. LAW. 267 (2009). 7 Those circuit courts that have considered the question regard FLSA collective actions as representative actions, which may be litigated by representative plaintiffs on behalf of others who are absent from the litigation. See, e.g., Myers, 624 F.3d at 542 ( plaintiffs in FLSA representative actions must affirmatively opt in to be part of the class and to be bound by any judgment ); Morgan v. Family Dollar Stores, 551 F.3d 1233, 1259 (11th Cir. 2008), cert. denied, 130 S. Ct. 59 (2009) ( The action proceeds throughout discovery as a representative action for those who opt-in ); Comer v. Wal-Mart Stores, Inc., 454 F.3d 544, 546 (6th Cir. 2008) ( Section 216(b) establishes two requirements for a representative action ); Harkins v. Riverboat Servs., 385 F.3d 1099, 1101 (7th Cir. 2004) ( In a collective (or, as it is sometimes called, a representative) action under the FLSA, a named plaintiff sues in behalf of himself... and other employees similarly situated ); Sperling v. Hoffmann-La Roche, Inc., 862 F.2d 439, 446 (3d Cir. 1988), aff d, 493 U.S. 165 (1989) ( the section s authorization of a representative action, surely must carry with it a right in the representative plaintiff to notify the people he would like to represent that he has brought a suit, and a power in the district court to place appropriate conditions on the exercise of that right ) (quoting Woods v. New York Life Ins. Co., 686 F.2d 578, 580 (7th Cir. 1982)); and Gray v. Swanney-McDonald, Inc., 436 F.2d 652, 655 (9th Cir. 1971) ( The Act itself does not define the unusual expression collective action. But the legislative history indicates that Congress intended the term to apply only to a representative action ). 3

4 employees must file a consent to be part of the suit (i.e., opt in ). 8 For this reason, many courts refer to collective actions under 216(b) as opt-in class actions. 9 Despite these similarities, courts have developed a unique procedure, completely different from Rule 23 s stringent standards, for determining whether an FLSA case may proceed as a representative action. This article addresses this anomaly, examining the language and purpose of the collective action provisions of 216(b) and the requirements of Rule 23, as well as the Rules Enabling Act, which addresses conflicts between the Federal Rules and federal statutes. We conclude that the opt-in requirements of FLSA 216(b) and the opt-out procedure in Rule 23 are insufficient to exempt 216(b) collective actions from Rule 23 in its entirety, including its rigorous certification requirements. As support for this conclusion, this article examines the abrogation clause of the Rules Enabling Act and how Congress has signaled its intention to exclude certain statutes from the purview of Rule 23. It next considers the class action procedures of the Court of Federal Claims, which demonstrate how the opt-in requirement of 216(b) can harmonize with other features of Rule 23. The Rules of the Court of Federal Claims (RCFC), adopted in 2002, permit only opt-in class actions, regardless of the substantive 8 See, e.g., Myers, 624 F.3d at 542 ( Unlike in traditional class actions maintainable pursuant to Federal Rule of Civil Procedure 23, plaintiffs in FLSA representative actions must affirmatively opt in to be part of the class and to be bound by any judgment ) (citing Hipp v. Liberty Nat l Life Ins. Co., 252 F.3d 1208, 1216 (11th Cir. 2001)); and Acevedo v. Allsup s Convenience Stores, Inc., 600 F.3d 516, 518 (5th Cir. 2010) ( Section 216(b) only authorizes such representative actions to be filed on behalf of individuals who have given their consent in writing to become... a party ). 9 See Law v. Continental Airlines Corp., 399 F.3d 330, 331 (D.C. Cir. 2003) ( Plaintiffs brought an opt-in class action suit against Continental ); Thiessen v. GE Capital Corp., 267 F.3d 1095, 1102 (10th Cir. 2001) ( Class actions under the ADEA are authorized by 29 U.S.C. 626(b), which expressly borrows the opt-in class action mechanism of the Fair Labor Standards Act of 1938 ); Hipp, 252 F.3d at 1217 ( To maintain an opt-in class action under 216(b), plaintiffs must demonstrate that they are similarly situated ); and Erie County Retirees Ass n v. County of Erie, 220 F.3d 193, 198 (3d Cir. 2000) ( the court certified the action as an opt-in class action ). 4

5 claim. Because the Court of Federal Claims interprets its procedural rules to correspond as closely as possible with the Federal Rules and the decisions of Article III courts, the RCFC provide a working example of how to incorporate the carefully struck balances embodied in Rule 23 into 216(b) cases. Finally, this article considers the Second Circuit s decision in Myers v. Hertz Corporation, 10 in which the plaintiff s state wage claim was entirely derivative of the FLSA claim. Myers demonstrates the irrational and inconsistent results that occur when courts apply two different standards for class certification -- one imputed to 216(b) and the other provided by Rule to the same class claims. The problem this raises can be seen in the varying approaches courts take in hybrid cases, so-called because they assert collective claims under 216(b) and class claims under similar state statutes, which are subject to Rule 23. Some courts have properly been concerned about litigating both an FLSA opt-in collective action and a class action asserting similar claims under a corresponding state statute in a single hybrid lawsuit. The problem they perceive is that because the state law claims are subject to Rule 23 s opt-out provisions, plaintiffs may obtain federal jurisdiction with an FLSA claim and then sidestep 216(b) s opt-in requirement by asserting an opt-out class claim under parallel state law that lacks an opt-in requirement F.3d 537(2d Cir. 2010). 11 Woodard v. FedEx Freight Express., Inc., 250 F.R.D. 178, 188 (M.D. Pa. 2008); accord Otto v. Pocono Health Sys., 457 F. Supp. 2d 522, 524 (M.D. Pa. 2006) ( To allow a Section 216(b) opt-in action to proceed accompanied by a Rule 23 opt-out state law class action claim would essentially nullify Congress intent in crafting Section 216(b) and eviscerate the purpose of Section 216(b) s opt-in requirement. ); McClain v. Leona s Pizzeria, Inc., 222 F.R.D. 574, 577 (N.D. Ill. 2004) ( allowing McClain to use supplemental state-law claims to certify an opt-out class in federal court would undermine Congress intent to limit these types of claims to collective actions. McClain cannot circumvent the opt-in requirement and bring unnamed parties into federal court by calling upon state statutes similar in substance to the FLSA that lack the opt-in requirement. ); Leuthold v. Destination Am., 224 F.R.D. 462, 470 (N.D. Cal. 2004) ( the 5

6 Ironically, other courts find no incompatibility between claims that are subject to the opt-in requirement of 216(b) on the one hand, and the opt-out procedure of Rule 23 on the other. Nevertheless these courts conclude that whether to certify each type of representative action must be decided by different principles. 12 These courts do not appear troubled by the fact that, in hybrid cases such as Myers, they often subject the same substantive claim, brought by the same plaintiffs and attorneys, on behalf of the same group of employees, seeking the same relief, to two different class certification procedures that potentially reach different conclusions. 13 The approach discussed in this article -- applying Rule 23 s certification requirements to opt-in collective actions under the FLSA -- eliminates this inconsistency. In addition, it provides for more efficient case management, effectuates Congress intent in imposing an opt-in requirement for FLSA collective actions, and complies with the Rules Enabling Act and the Supreme Court s directive that the Federal Rules are to be applied in federal court. policy behind requiring FLSA plaintiffs to opt in to the class would largely be thwarted if a plaintiff were permitted to back door the shoehorning in of unnamed parties through the vehicle of calling upon similar state statutes that lack such an opt-in requirement. ) (quoting Rodriguez v. Texan, Inc., 2001 U.S. Dist. LEXIS 24652, at *3 (N.D. Ill. Mar. 7, 2001). 12 See, e.g., Guzman v. VLM, Inc., 2007 U.S. Dist. LEXIS (E.D.N.Y. Oct. 11, 2007) and Guzman v. VLM, Inc., 2008 U.S. Dist. LEXIS (E.D.N.Y. Mar. 2, 2008) in which the same district court first conditionally certifies a 216(b) FLSA collective action under a lenient standard, finding the more stringent certification requirements of Rule 23 inapplicable, and then finds the two types of cases are not incompatible and could proceed simultaneously in the same action. 13 See, e.g., Leuthold, 224 F.R.D. at 470 (granting plaintiffs motion to certify plaintiffs claims under the FLSA for purposes of giving notice, but denying the same claims under California state law for failure to satisfy the requirements of Rule 23(b)(3)). 6

7 II. The Conditional Certification Procedure Under FLSA 216(b) following: A. Neither the Supreme Court s Decision in Hoffmann-La Roche v. Sperling nor the Language of the Statute Itself Excludes FLSA Collective Actions from Rule 23 s Class Certification Requirements The sole indication in 216(b) of how a collective action shall proceed is the An action to recover the liability prescribed in either of the preceding sentences may be maintained against any employer (including a public agency) in any Federal or State court of competent jurisdiction by any one or more employees for and in behalf of himself or themselves and other employees similarly situated. No employee shall be a party plaintiff to any such action unless he gives his consent in writing to become such a party and such consent is filed in the court in which such action is brought. The court in such action shall, in addition to any judgment awarded to the plaintiff or plaintiffs, allow a reasonable attorney s fee to be paid by the defendant, and costs of the action. 14 Nothing in this text requires or even suggests that representative actions under this statute should proceed independently of Rule 23. In fact, when Congress amended the FLSA in 1947, modern Rule 23, with its opt-out provision, was 19 years from being drafted. 15 The U.S. Supreme Court has never held, nor even suggested, that Rule 23 s certification requirements do not apply to FLSA collective actions. In Hoffmann-La Roche v. Sperling, generally cited as the seminal case on procedural issues under FLSA 216(b), the U.S. Supreme Court addressed only the narrow question whether, in an ADEA action [governed under FLSA 216(b)], district courts may play any role in prescribing the terms and conditions of communication from the named plaintiffs to the U.S.C. 216(b). 15 See 29 U.S.C. 216(b) Historical and Statutory Notes and Fed. R. Civ. P. 23, Advisory Committee Notes, 1966 Amendment. 7

8 potential members of the class on whose behalf the collective action has been brought. 16 The Court s holding is equally narrow: We hold that district courts have discretion, in appropriate cases, to implement 29 U.S.C. 216(b)... by facilitating notice to potential plaintiffs. 17 Other than that, the Supreme Court did not address -- and has not addressed -- the procedures and standards that apply in determining whether an FLSA 216(b) case should proceed as a collective action. The Court has not addressed the plaintiff s burden of proof, the degree of scrutiny a district court must give to the qualifications of class counsel, the process for determining whether the plaintiffs are similarly situated, nor when the district court should make these decisions. Nor does Hoffmann-La Roche suggest in any way that Rule 23 s procedures do not apply to these cases. In fact, in discussing the important role the district court should play in facilitating communications in 216(b) representative actions, the Court analogized to Rule 23: We have recognized that a trial court has a substantial interest in communications that are mailed for single actions involving multiple parties. In Gulf Oil Co. v. Bernard, 452 U.S. 89, 101 (1981), we held that a District Court erred by entering an order that in effect prohibited communications between the named plaintiffs and others in a Rule 23 class action. Observing that class actions serve important goals but also present opportunities for abuse, we noted that because of the potential for abuse, a district court has both the duty and the broad authority to exercise control over a class action and to enter appropriate orders governing the conduct of counsel and the parties. 452 U.S. at 100. The same justifications apply in the context of an ADEA action. Although the collective form of action is designed to serve the important function of preventing age discrimination, the potential for misuse of the class device, Hoffmann-La Roche, 493 U.S. at 169. Id. (internal statutory citations omitted). 8

9 as by misleading communications, may be countered by court-authorized notice. 18 In the absence of Supreme Court guidance, the lower courts have designed their own rules to determine whether a case should proceed as an FLSA 216(b) collective action. Most common is a two-step procedure, often referred to as the Lusardi two-step, after the widely cited case that seems to have begun the practice. 19 Indeed, a recent Lexis search using the search FLSA and collective action and two-step resulted in 422 hits. 20 Among these hits were decisions from four circuit courts. Substituting twostage for two-step added an additional 235 opinions. The two-step procedure has been described by the Fifth Circuit as follows: Under Lusardi the trial court approaches the similarly situated inquiry via a two-step analysis. The first determination is made at the so-called notice stage. At the notice stage, the district court makes a decision usually based only on the pleadings and any affidavits which have been submitted whether notice of the action should be given to potential class members. Because the court has minimal evidence, this determination is made using a fairly lenient standard and typically results in conditional certification of a representative class. If the district court conditionally certifies the class, putative class members are given notice and the opportunity to optin. The action proceeds as a representative action throughout discovery. The second determination is typically precipitated by a motion for decertification by the defendant usually filed after discovery is largely complete and the matter is ready for trial. At this stage, the court has much more information on which to base its decision, and makes a factual determination on the similarly situated question. If the 18 Id. at Lusardi v. Lechner, 855 F.2d 1062, 1074 (3d Cir. 1988); see also Allen v. McWane, Inc., 2006 U.S. Dist. LEXIS 81543, at *11 (E.D. Tex. Nov. 7, 2006) ( The Lusardi two-step approach is the prevailing test among federal courts. ). 20 Visited on Nov. 29,

10 claimants are similarly situated, the district court allows the representative action to proceed to trial. 21 The second step in the certification proceedings arises when (and if) the defendant moves to decertify the class. At this stage, the similarly-situated inquiry is more stringent than at the first stage. 22 In determining whether the case should remain a collective action, courts consider the: (1) disparate factual and employment settings of the individual plaintiffs; (2) the various defenses available to defendants which appear to be individual to each plaintiff; [and] (3) fairness and procedural considerations. 23 As the Eleventh Circuit has pointed out, at the second stage the court s analysis must extend beyond the mere facts of job duties and pay provisions. Otherwise, it is doubtful that 216(b) would further the interests of judicial economy, and it would undoubtedly 21 Mooney v. Aramco Servs. Co., 54 F.3d 1207, (5th Cir. 1995). Although courts differ in how light a burden to impose at the first step, as stated above, courts generally make their decision based solely on the pleadings, affidavits, and declarations submitted by the plaintiffs. See, e.g., Hipp, 252 F.3d at 1218; Shajan v. Barolo, 2010 U.S. Dist. LEXIS (S.D.N.Y. June 2, 2010); Sexton v. Franklin First Fin., Ltd., 2009 U.S. Dist. LEXIS (E.D.N.Y. June 16, 2009). However, while courts routinely credit affidavits submitted by plaintiffs, many, particularly in the Second Circuit, have ignored similar evidence proffered by defendants. E.g., Francis v. A&E Stores, Inc., 2008 U.S. Dist. LEXIS 83369, at *8-9 (S.D.N.Y. Oct. 15, 2008) ( while Defendant has supplied what it calls undisputed store manager affidavits,... on which it also relies for the proposition that [assistant store manager] duties are variable, those affidavits should be discounted at this stage. ); see also In re Penthouse Exec. Club Comp. Litig., 2010 U.S. Dist. LEXIS , at *7 (S.D.N.Y. Oct. 27, 2010) (in deciding conditional certification, the court does not resolve factual disputes, decide ultimate issues on the merits, or make credibility determinations ); Vaughan v. Mortgage Source L.L.C., 2010 U.S. Dist. LEXIS (E.D.N.Y. Apr. 14, 2010), at *21 (Apr. 14, 2010) (declining to assign weight to defendants competing affidavits and reasoning that [a]ttacks on credibility... are not properly addressed in the context of a motion for conditional certification ); Cohen v. Gerson Lehrman Group, Inc., 686 F. Supp.2d 317, 330 (S.D.N.Y. 2010) (declining to wade into a thicket of competing factual assertions at this preliminary stage). In contrast, [i]n evaluating a motion for class certification [under Rule 23], the district court is required to make a definitive assessment of Rule 23 requirements, notwithstanding their overlap with merits issues, and must resolve material factual disputes relevant to each Rule 23 requirement. Brown, 609 F.3d at 476; and Damassia v. Duane Reade, Inc., 2006 U.S. Dist. LEXIS (S.D.N.Y. Oct. 4, 2006) (concluding that defendant s attacks on plaintiffs affidavits and other evidence are premature at the notice stage)). 22 Anderson v. Cagle s Inc., 488 F.3d 945, 953 (11th Cir. 2007); and Thiessen v. GE Capital Corp., 267 F.3d 1095, 1103 (10th Cir. 2001). 23 Anderson, 488 F.3d at 953.; Cruz v. Lyn-Rog Inc., 2010 U.S. Dist. LEXIS (E.D.N.Y. Dec. 6, 2010); and Harris v. Vector Mktg. Corp., 2010 U.S. Dist. LEXIS (N.D. Cal. Nov. 5, 2010). 10

11 present a ready opportunity for abuse. 24 Commonly, and in increasing numbers, FLSA plaintiffs have availed themselves of the lenient standards applied by the courts to conditionally certify collective actions. 25 Although this procedure anticipates a second stage, in which courts revisit their initial certification decision in light of a fuller record, 26 practically speaking the second stage is reached only in a small minority of cases. 27 Because conditional certification frequently subjects employers to mind-boggling discovery costs, 28 the costs and resources required to defend a case, even if only conditionally certified, places enormous pressure on employers to settle cases prior to reaching the second step. 29 These costs are not confined to the employer, because courts too are burdened by cases that persist only because judges have deferred carefully scrutinizing whether, in fact, 24 Anderson, 488 F.3d at 953 (internal citations omitted). 25 As reported by LexisNexis CourtLink, the number of FLSA collective actions filed in federal courts from 1988, when Lusardi endorsed the two-step process, to 2010 increased from six to 1,994. In contrast, during the same period the number of employment civil rights class action filed in federal courts (mostly Title VII discrimination cases) increased from 13 to 114, as reported by LexisNexis CourtLink. This dramatic increase in FLSA collective actions is certainly not what Congress intended when it passed the Portal-to-Portal Act in 1947, adding the opt-in requirement for collective actions, to curb the flood of litigation that was occurring at that time. De Asencio v. Tyson Foods, Inc., 342 F.3d 301, 306 (3d Cir. Pa. 2003) (citing 93 Cong. Rec. 2,087 (1947)). 26 Id. 27 For example, of more than 50 cases identified in the Southern District of New York (using a Lexis search for FLSA and decertif! ) only four actually decide the question of decertification and none decertify the collective action. 28 Williams v. Accredited Home Lenders, Inc., 2006 U.S. Dist. LEXIS 50653, at *16 (N.D. Ga. 2006). 29 Rachel K. Alexander, Federal Tails and State Puppy Dogs: Preempting Parallel State Wage Claims to Preserve the Integrity of Federal Group Wage Actions, 58 AM. U.L. REV. 515, 541 (2009) (noting that conditional certification results in settlement pressure because it signals the potential expansion of the case and the need for significant and expensive class-wide discovery ); William C. Martucci and Jennifer K. Oldvader, Addressing the Wave of Dual-Filed Federal FLSA and State Law Off-The-Clock Litigation: Strategies for Opposing Certification and a Proposal for Reform, 19 KAN. J.L. & PUB. POL Y 433, 451 (2010 ) (noting that the costs of discovery following conditional certification, which may be granted if the plaintiff does as little as make substantial allegations showing possible FLSA violations... can result in enormous pressure on defendants to settle ). 11

12 they can be tried in representative fashion. 30 III. An Overview of Rule 23 Procedures. The Federal Rules of Civil Procedure, which were promulgated under the Rules Enabling Act of 1934, 31 include in Rule 23 a comprehensive set of principles that govern class actions in federal court. This rule was designed to weed out cases that are unlikely to achieve the overarching goals of judicial efficiency and due process by, among other things, prescribing the procedures courts must follow to certify a case as a class action. 32 Rules 23(a) and (b) set forth the criteria plaintiffs must meet to certify a case as a class action. Rule 23(a) requires a plaintiff to establish four elements, usually referred to as numerosity, commonality, typicality, and adequacy of representation. A plaintiff also must meet the requirements of one of Rule 23(b) s subsections. 33 Rule 23(b)(3), the subsection that most likely would apply to FLSA collective actions, requires proof that a class action would be superior to other methods of fairly and efficiently adjudicating the case, and that common questions of law or fact predominate over individual issues. This subsection also provides that once a class is certified, class members are bound by any judgment unless they opt out of the litigation. Rule 23(c)(1)(A) requires courts to decide class certification at an early practicable time. The Supreme Court has instructed courts to engage in a rigorous analysis of the pleadings, declarations, and other record evidence to assess whether plaintiffs have 30 West v. Border Foods, Inc., 2006 U.S. Dist. LEXIS 96963, at *7 (D. Minn. June 12, 2006) ( [N]either the remedial purposes of the FLSA, nor the interests of judicial economy, would be advanced if we were to overlook facts which generally suggest that a collective action is improper. ) U.S.C.S General Tel. Co. of the Sw. v. Falcon, 457 U.S. 147, 155 (1982). 33 In the Second Circuit and elsewhere this proof must be made by a predominance of the evidence. Brown, 609 F.3d at

13 satisfied those burdens. 34 As we noted in Coopers & Lybrand v. Livesay, the class determination generally involves considerations that are enmeshed in the factual and legal issues comprising the plaintiff s cause of action. Sometimes the issues are plain enough from the pleadings to determine whether the interests of the absent parties are fairly encompassed within the named plaintiff s claim, and sometimes it may be necessary for the court to probe behind the pleadings before coming to rest on the certification question. 35 If a class is certified, Rule 23(c) prescribes that the court must issue an order defining the class, identifying class claims, and appointing class counsel. Rule 23(g) indicates the factors the court must consider in making that appointment. Rule 23(c) also prescribes the content of the notice the court must direct to class members after the class is certified, explaining the nature of the action and the class member s right to opt out. Rule 23(d) describes the district court s power to issue orders controlling the course of proceedings. Rule 23(e) specifies the terms under which a class action may be settled, dismissed, or compromised. Rule 23(h) concerns the attorney s fee that may be awarded to counsel and the procedures that govern that determination. In 1998, the Supreme Court amended Rule 23 to include subsection (f), providing for a permissive interlocutory appeal, at the sole discretion of the court of appeals, from a certification order. Rule 23(c)(1)(C) was amended in 2003 to delete the provision that a class certification may be conditional. The Advisory Committee explained the reason for the deletion: A court that is not satisfied that the requirements of Rule 23 have been met Falcon, 457 U.S. at 162. Id. (internal citations omitted). 13

14 should refuse certification until they have been met. 36 IV. The Procedural Differences Between Rule 23 and FLSA 216(b) as Applied by the Courts. The procedures courts have devised under the FLSA depart dramatically from Rule 23 s requirements. A brief review suffices to identify these marked differences. Aside from the distinction between an opt-in and opt-out class, discussed above, salient procedural differences include the following: Rule 23 discourages conditional certification, whereas conditional certification is widely viewed as the initial step in FLSA collective actions. Rule 23 requires courts to engage in a rigorous analysis and resolve those factual disputes necessary to determine whether a plaintiff has satisfied Rules 23(a) and appropriate subsections of 23(b), prior to notifying putative class members; 37 under 216(b) courts apply a lenient analysis in deciding whether to conditionally certify a class, and apply heightened scrutiny only after notifying potential class members, and then only if the defendant moves to decertify the class. 38 Rule 23 prescribes in considerable detail what the notice must contain; 39 under 216(b) courts craft notices on an ad hoc basis. Rule 23 requires courts to assess whether the representative parties, including their counsel, will fairly and adequately represent the class, and the court appoints class counsel; under 216(b) courts make no inquiry into the qualifications of class counsel or the adequacy of the representative plaintiff(s) FED. R. CIV. P. 23, 2003 Advisory Committee s Note. 37 Brown, 609 F.3d at 476 ( In evaluating a motion for class certification, the district court is required to make a definitive assessment of Rule 23 requirements, notwithstanding their overlap with merits issues, and must resolve material factual disputes relevant to each Rule 23 requirement. The Rule 23 requirements must be established by at least a preponderance of the evidence. ). 38 Prizmic v. Armour, Inc., 2006 U.S. Dist. LEXIS 42627, at *2 (E.D.N.Y. June 12, 2006) ( Only after discovery has been completed should the Court engage in a second more heightened stage of scrutiny to determine whether the class should be decertified or the case should proceed to trial as a collective action. ). 39 Fed. R. Civ. P. 23(c)(2)(b). 40 Hoffmann v. Sbarro, Inc., 982 F. Supp. 249, 263 (S.D.N.Y. 1997) ( Section 216(b), which provides for collective actions under the FLSA, is silent on the issue of adequacy of representation, nor does it direct courts to follow the dictates of Rule 23 in certifying a class. Consequently, the prevailing view among federal courts, including courts in this Circuit, is that 216(b) collective actions are not subject to Rule 23 s strict requirements, particularly at the notice stage. ). 14

15 Rule 23(b)(3)(d) requires courts to consider the likely difficulties in managing a class action before certifying a class; under 216(b), courts usually defer considering questions of case management until deciding whether to decertify the class. 41 Rule 23 permits parties to appeal either the denial or granting of class certification, subject to the appellate court s discretion; under 216(b), appellate courts routinely conclude that they lack jurisdiction to consider orders pertaining either to the first or second-step certification decisions. 42 V. The Federal Rules Govern Federal Courts in the Absence of a Specific Statutory Conflict or an Express Exception to the Rules. A. Federal Courts Must Apply the Federal Rules of Civil Procedure. Are the procedures adopted by the courts for FLSA representative actions mandated by the substantive terms of the FLSA or are they, instead, an unauthorized departure from the Federal Rules? To help answer the question, we begin with the Rules Enabling Act (REA), 43 enacted in 1934 to establish the primacy of the Federal Rules of Civil Procedure in federal courts. The REA states in pertinent part: All laws in conflict with [the Federal Rules of Civil Procedure] shall be of no further force or effect after such rules have taken effect. 44 This provision, referred to as the abrogation clause, reflects Congressional intent that the Federal Rules shall supersede all pre-existing procedural rules. Laws and procedures enacted after the Federal Rules take precedence 41 Vondriska v. Premier Mktg. Funding, Inc., 564 F. Supp.2d 1330, 1336 (M.D. Fla. 2007) (asserting that concerns regarding the manageability of the proposed class and whether the interests of judicial economy will actually be served by a collective action... are more appropriately addressed at the decertification stage when additional information is available regarding the characteristics of the class ); Gieseke v. First Horizon Home Loan Corp., 408 F. Supp.2d 1164, 1168 (D. Kan. 2006) (deferring manageability issues to the decertification stage). But see, e.g., D Anna v. M/A-COM, Inc., 903 F. Supp. 889, 894 (D. Md. 1995) ( As a matter of sound case management, a court should, before offering [to assist plaintiff in locating additional plaintiffs], make a preliminary inquiry as to whether a manageable class exists. ) (quoting Severtson v. Phillips Beverage Co., 137 F.R.D. 264, (D. Minn. 1991)). 42 See Myers, 624 F.3d at 557 (finding court lacked pendent appellate jurisdiction to consider Collective Action Order) U.S.C Id. 2072(b). 15

16 only to the extent they create an actual conflict with the Rules. 45 The Federal Rules themselves provide: These rules govern the procedure in all civil actions and proceedings in the United States district courts except as stated in Rule Rule 81(a)(6) states: These rules, to the extent applicable, govern proceedings under the following laws, except as these laws provide other procedures... Rule 81, most recently amended in 2007, identifies seven statutes, including the National Labor Relations Act; it does not include the Fair Labor Standards Act. Thus, even in this special category of laws, the Federal Rules are deemed to apply unless the statute in question states otherwise. As the Supreme Court explained in Amchem Products, Inc. v. Windsor, the procedures of the Federal Rules should not lightly be disregarded: Federal Rules take effect after an extensive deliberative process involving many reviewers: a Rules Advisory Committee, public commenters, the Judicial Conference, this Court, the Congress. See 28 U.S.C. 2073, The text of a rule thus proposed and reviewed limits judicial inventiveness. Courts are not free to amend a rule outside the process Congress ordered, a process properly tuned to the instruction that rules of procedure shall not abridge... any substantive right. 47 Similarly, in Hanna v. Plumer the Court observed: the [district] court has been instructed to apply the Federal Rule, and can refuse to do so only if the Advisory Committee, this Court, and Congress erred in their prima facie judgment that the Rule in question transgresses neither the terms of the Enabling Act nor constitutional restrictions Callihan v. Schneider, 178 F.3d 800, 802 (6th Cir. 1999).. Fed. R. Civ. P. 1. Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 620 (1997) (emphasis added). 380 U.S. 460, 471 (1965). 16

17 No court has found that the certification procedures of Rule 23 violate the Constitution or the REA, or abridge a substantive right. Accordingly, based on the REA, and in accordance with the pronouncements of the Supreme Court, Rule 23 s certification requirements apply unless they conflict with an express statutory directive to the contrary, enacted subsequent to Rule 23. The Supreme Court s opinion in Shady Grove Orthopedic Associates, P.A. v. Allstate holds that like the rest of the Federal Rules of Civil Procedure, Rule 23 automatically applies in all civil actions and proceedings in the United States district courts. 49 More specifically the Court observed: Congress, unlike New York, has ultimate authority over the Federal Rules of Civil Procedure; it can create exceptions to an individual rule as it sees fit -- either by directly amending the rule or by enacting a separate statute overriding it in certain instances. The fact that Congress has created specific exceptions to Rule 23 hardly proves that the Rule does not apply generally. In fact, it proves the opposite. If Rule 23 did not authorize class actions across the board, the statutory exceptions would be unnecessary. 50 For an example of how Congress indicates its intent to remove a statute from the purview of Rule 23 consider the Immigration and Nationality Act, 1252 (e)(1): Without regard to the nature of the action or claim and without regard to the identity of the party or parties bringing the action, no court may -- (A) enter declaratory, injunctive, or other equitable relief in any action pertaining to an order to exclude an alien... except as specifically authorized in a subsequent paragraph of this subsection, or (B) certify a class under Rule 23 of the Federal Rules of Civil Procedure in any action for which judicial review is 49 added). 50 Shady Grove Orthopedic Assocs., P.A. v. Allstate, 130 S. Ct. 1431, 1438 (2010) (emphasis Id. at

18 authorized under a subsequent paragraph of this subsection. 51 Nothing approaching this clear expression of intent appears in 216(b). Nevertheless, a few courts find support for denying the applicability of Rule 23 to FLSA collective actions in a sentence in the 1966 Advisory Committee Notes, which states, [t]he present provisions of 29 U.S.C. 216(b) are not intended to be affected by Rule 23, as amended. 52 Thus, it has been suggested, FLSA collective actions in all respects are exempt from Rule 23 s class certification requirements. This sentence provides no such support. To reiterate, the REA provides that amendments to the Federal Rules abrogate all other procedural rules in effect when the amendment is adopted. Because the FLSA s opt-in provision, which was amended to the statute in 1947, 53 was in effect when modern Rule 23 was adopted (in 1966), 54 the opt-in provision arguably would have been abrogated by the opt-out provisions of Rule 23. The Advisory Committee apparently added this sentence to preserve the 216(b) opt-in procedure. It is pure fiction, however, to suggest that this sentence also was intended to retain Lusardi s two-step procedure because that invention would not become part of FLSA litigation for another 20 years! B. At Least One Federal Court Has Recognized that Rule 23 Certification Requirements Apply to 216(b) Collective Actions. Shushan v. University of Colorado at Boulder 55 exposed the inconsistency between the purpose, legislative history, and language of 216(b), and the approach courts have taken to conditionally certify collective actions. While recognizing that U.S.C. 1252(e)(1). FED. R. CIV. P. 23, Advisory Committee Notes, 1966 Amendment.. 29 U.S.C. 216(b) Historical and Statutory Notes. 18

19 216(b) s opt-in provision is irreconcilable with Rule 23 s opt-out feature, Shushan concludes that it does not follow that every other feature of Rule 23 is similarly irreconcilable 56 and holds that representative actions under 216(b) must satisfy all of the requirement of FED. R. CIV. P 23, insofar as those requirements are consistent with 29 U.S.C.A. 216(b). 57 As the court points out, there is no logical reason to infer that because Congress did not provide any procedural guidance for collective actions under 216(b), other than the opt-in mandate, it intended that Rule 23 should not apply. In light of this deafening silence, it does not seem sensible to reason that, because Congress has effectively directed courts to alter their usual course and not be guided by Rule 23 s opt-out feature in ADEA class actions [which are governed by 216(b)], it has also directed them to discard the compass of Rule 23 entirely and navigate the murky waters of such actions by the stars or whatever other instruments they may fashion. 58 VI. Notwithstanding the Rules Enabling Act, Most Courts Hold that Rule 23 Does Not Apply to FLSA 216(b) Collective Actions Despite the Rules Enabling Act, as well as the reasoning and legislative history supporting Shushan, no court of appeals has endorsed its approach, and at least four appellate courts either have expressly adopted the two-step framework, or disapproved of Shushan s reliance on Rule The most frequent reasons for rejecting the Rule Fed. R. Civ. P. 23, Advisory Committee Notes, 1966 Amendment F.R.D. 263 (D. Colo. 1990). 56 Shushan, 132 F.R.D at Id. at 265; accord St. Leger v. A.C. Nielsen Co., 123 F.R.D. 567 (N.D. Ill. 1988) (stating that certification was inappropriate because common questions did not predominate). 58 Shushan, 132 F.R.D. at See McKnight v. D. Houston, Inc., 2010 U.S. Dist. LEXIS , at *11 (S.D. Tex. Nov. 18, 2010) ( Courts recognize two methods to determine whether to authorize notice to similarly situated employees advising them of their right to join an FLSA collective action. These methods are the two-step Lusardi approach and the class action-based Shushan approach. Most courts, including district courts in this circuit, use the two-step ad hoc approach as the preferred method for the similarly situated analysis rather than the Rule 23 requirements. ); see also Villatoro v. Kim Son Rest., 286 F. Supp.2d 807, 809 (S.D. Tex. 2003) (citing cases from the Fifth, Seventh, Tenth, and Eleventh Courts of Appeals); and Lusardi,

20 criteria have been: (1) the FLSA s opt-in framework makes it procedurally incompatible with Rule 23; and (2) Congress failure to indicate that it intended Rule 23 to apply to 216(b) actions leaves courts free to fashion their own procedures. Regarding the first reason, courts frequently cite LaChapelle v. Owens Illinois, Inc. for the proposition that there is a fundamental, irreconcilable difference between the class action described by Rule 23 and that provided for by FLSA [2]16(b). 60 The quoted phrase in LaChapelle, however, refers to the obvious difference between the optin requirement of 216(b) and the opt-out requirement of Rule 23. LaChapelle does not address any other Rule 23 provisions or their compatibility with 216(b). In fact, LaChappelle concerns whether the FLSA s opt-in provisions also apply to collective actions under the Age Discrimination in Employment Act: Since ADEA 7(b) adopts [FLSA 216(b)], we must hold that only opt-in type class actions may be utilized in age discrimination cases. Rule 23 cannot be invoked to circumvent the consent requirement of the third sentence of FLSA [2]16(b) which has unambiguously been incorporated into ADEA by its Section 7(b). 61 In other words, while LaChapelle confirms that ADEA and FLSA collective actions under 216(b) require potential plaintiffs to opt in to a collective action under those statutes, it says nothing about the procedures to apply in determining whether a case should be certified. Regarding the second reason for refusing to apply Rule 23 s certification requirements to FLSA 216(b) cases, the Sixth Circuit recently observed: F.2d at 1074 ( we again acknowledge Lusardi s correct statement that FLSA [2]16(b) class actions alleging a pattern or practice of discrimination are not governed by Fed.R.Civ.P. 23 ). 60 LaChapelle v. Owens Illinois, Inc., 513 F.2d 286, 288 (5th Cir. 1975). 61 Id. at

21 While Congress could have imported the more stringent criteria for class certification under Fed. R. Civ. P. 23, it has not done so in the FLSA.... The district court implicitly and improperly applied a Rule 23-type analysis when it reasoned that the plaintiffs were not similarly situated because individualized questions predominated. This is a more stringent standard than is statutorily required.... We do not suggest that aspects of Rule 23 could never be applied to a FLSA collective action. Rather, applying the criterion of predominance undermines the remedial purpose of the collective action device. 62 According to the Sixth Circuit, Rule 23 s certification requirements, and in particular Rule 23(b)(3) s predominance requirement, do not apply to 216(b) cases because the FLSA did not expressly so provide, and doing so would undermine the remedial purpose of the collective action provision in the statute. 63 The premise that Congress affirmatively must state that the Federal Rules govern proceedings under a particular statute for the Federal Rules to apply is backwards. In accordance with the REA, and the Supreme Court s holding in Shady Grove, Congress must affirmatively exempt a statute from the reach of the Federal Rules. The idea that courts are free to disregard the Federal Rules in the absence of statutory language mandating that the Rules apply therefore turns federal jurisprudence on its head. For this reason, it is exceedingly rare for any statute to reference the Federal Rules. VII. Congress Intent in Amending the FLSA Is Effectuated by Applying Federal Rule 23. A. Rule 23 s Certification Requirements Are Consistent with the Policies and Legislative History Behind the Opt-in Provisions of 216(b). As a matter of policy, Rule 23 s certification requirements are consistent with the 62 O Brien v. Ed Donnelly Enters., 575 F.3d 567, (6th Cir. 2009). 21

22 purpose of representative actions under 216(b). To certify a case as a representative action (i.e., a class action) under Rule 23(b)(3), a court must find that: (1) all of the factors of Rule 23(a) are satisfied (numerosity, commonality, typicality and adequacy of representations); (2) common questions of law and fact predominate over individual questions; and (3) a class action is superior to other available methods for fairly and efficiently adjudicating the matter. 64 The 1996 Advisory Committee Notes reflect that the purpose of Rule 23(b)(3) s predominance inquiry is to ascertain whether a class action will be an efficient use of judicial resources: It is only where this predominance exists that economies can be achieved by means of the class action device. 65 The Second Circuit emphasized this point recently in Myers v. Hertz: The predominance requirement of Rule 23(b)(3) tests whether proposed classes are sufficiently cohesive to warrant adjudication by representation. Amchem, 521 U.S. at 623. The requirement s purpose is to ensure[] that the class will be certified only when it would achieve economies of time, effort, and expense, and promote uniformity of decision as to persons similarly situated, without sacrificing procedural fairness or bringing about other undesirable results. 66 Section 216(b) serves the same public policy. In discussing the benefits of collective actions under 216(b), the Supreme Court in Hoffmann-La Roche expressed the same policy interest and even used Rule 23 s commonality language to articulate the concept: 63 Id. at Fed. R. Civ. P. 23(a) and (b)(3). Neither the FLSA nor the Supreme Court provide any guidance in determining who is similarly situated for purposes of determining whether should issue and a case should proceed as a class action. Because notice is also principally at issue in determining whether to certify an FLSA collective action, it is logical to use the same criteria set forth in Rule 23(b)(3) for 216(b) actions as well. The Advisory Committee Notes to the 1966 Amendments to Rule 23 support this concept, stating that [s]ubdivision (b)(3) encompasses those cases in which a class action would achieve economies of time, effort, and expense and promote uniformity of decisions as to persons similarly situated... There is no reason to endow the same phrase in 216(b) that differ markedly from Rule 23(b)(3). 22